In Australia, the ASX 200 faced a challenging week, closing down 0.3% despite a late rebound on Friday. The initial sell-off was triggered by a hotter-than-expected CPI print, where April consumer prices rose 3.6% year-on-year, surpassing estimates of 3.4%. This prompted a re-evaluation of inflation expectations and market sentiment. The week saw mixed performances across sectors, with Utilities and Materials dragging the index down, while Consumer Staples and Discretionary sectors showed resilience, posting gains of 1.0% and 0.8% respectively.
US markets also ended in the red, with the Nasdaq, Dow Jones, and S&P 500 down 1.1%, 1.0%, and 0.5% respectively. The latest data showed that headline Personal Consumption Expenditure (PCE), the Fed’s preferred inflation measure, aligned with expectations, while GDP growth slowed due to softer consumer spending. Despite this, ten-year US Treasury yields climbed, reflecting market expectations of a rate cut by the end of 2024. Notably, the S&P 500’s performance in the first 100 days of 2024 has been robust, suggesting a positive outlook for the rest of the year based on historical trends.
In Europe, the Euro Stoxx 50 and other major indices saw declines as well, influenced by shifting expectations regarding Fed rate cuts. However, the ECB appears poised for a potential rate cut in June, driven by a weaker growth trajectory and core inflation nearing the 2% target. This divergence in monetary policy outlooks between the Fed and ECB underscores varying economic conditions across the Atlantic. Meanwhile, in Asia, Chinese and Hong Kong markets dipped on disappointing PMI figures, indicating a contraction in factory activity, while Japanese markets showed mixed reactions to economic data, with retail sales up but industrial production down.
Overall, while the markets faced a series of challenges this week, the underlying trends and historical data offer a cautiously optimistic outlook for the remainder of the year.
Published 4/6/2024
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